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Due Diligence in Commercial Property Sales: Seller and Buyer Concerns

Liens, Title Restrictions, Zoning, ADA Compliance, Environmental Issues

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Wednesday, April 20, 2022

Recorded event now available

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This CLE course will answer concerns that real estate counsel must consider when representing buyers and sellers in real estate transactions. The panel will address both the most common issues that buyers face and the issues that sellers often overlook, in order to minimize liabilities.

Description

There are risks inherent in purchasing property, and buyers are not expected to purchase blindly. Many jurisdictions have unique laws that affect real estate transactions. In addition to title searches, some jurisdictions, such as Florida, have liens, fees, and permit violations that are attached to properties rather than individuals, which necessitates a municipal lien search as part of the closing process.

Buyers want to ensure that taxes and insurance are up to date, as well as a review of compliance with current zoning rules and property codes. If problems are uncovered, or if the buyer plans on making any changes to the property, including its use, then additional permits and business licenses may be required. For an income-producing property like an office building or apartment complex, a thorough review of the lease payment history will shed light on the orderly and predictable flow of rental income.

The challenges and issues that face sellers during the due diligence process are addressed less often. Most landowners understand that they may be liable for injuries to others that occur on their property. Often, these individuals will be third-party contractors (e.g., environmental inspectors, engineers, or architects) engaged by a buyer. If these parties are injured on-site, the seller may incur costs and liability exposure.

Occasionally, one party may seek to change the property’s zoning or permits, to make the property more marketable or increase its value. While the property is off the market, there is no guarantee that the transaction will close without the flexibility to sell the property for a higher price if the market changes. If the potential buyer obtains these changes, the property may be unfit for other uses.

Although most due diligence is limited to investigations of the property in its current condition or feasibility, buyers may seek to improve the property before closing or engage third parties to plan future improvements. Those situations may entitle third-party contractors to "construction liens" if they are not fully paid for their work. This creates a risk to a seller because construction liens attach to the for-sale property, even though the seller never contracted with the lien claimant and has no duty to pay them.

Listen as our authoritative panel addresses the need for buyers and sellers to complete due diligence before closing on a property. The panel will discuss how to navigate those issues to avoid these potential pitfalls and ensure that a transaction goes from signature to closing without unexpected problems.

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Outline

  1. Due diligence from buyer perspective
    1. Title searches
      1. Easements
      2. Covenants
      3. Municipal lien searches
    2. Zoning and permitting
      1. Timing issues for closing
    3. Tax and insurance
    4. Lease
      1. Subordination and attornment
  2. Due diligence from seller perspective
    1. Premises liability
      1. Third-party contractors
    2. Entitlements
      1. Zoning
      2. Permitting
        1. Restricted use
    3. Construction liens

Benefits

The panel will review these and other important topics:

  • What considerations should a buyer have when entering a real estate transaction?
  • What jurisdictions require a municipal lien search?
  • How is zoning and permitting issues different for buyers and sellers
  • What considerations should a seller have when entering a real estate transaction?
  • How can liability insurance mitigate the risk of third-party contractors damaging the property?

Faculty

Feffer, Bruce
Bruce Feffer

Partner
Scarinci Hollenbeck

Mr. Feffer has 30+ years of experience representing numerous clients in buying, selling, financing and leasing all...  |  Read More

Woodard, Larry
Larry N. Woodard

Co-Leader, Construction Planning Practice Group
Honigman

Mr. Woodard is an experienced attorney who focuses his practice on real estate law. He represents Fortune 500...  |  Read More

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